Construction of the long-awaited Hotel MOHI is continuing in downtown Morgan Hill, but the project’s completion date has been pushed back. The site’s hotel rooms are now expected to open later this year and the restaurant and amenity spaces are projected for completion in 2027.
The project on the east side of Monterey Road at First Street, first approved by the city council in 2016 as a 60-room boutique hotel, has faced a cascade of setbacks driven by the COVID-19 pandemic, soaring construction costs and supply chain disruptions. Since then, an additional floor expanding the hotel to 76 rooms has been added to construction plans.
“This is a boutique hotel that is designed inch by inch,” said Hotel MOHI developer Frank Leal, addressing criticism regarding the slow pace of construction. “When it’s done, it’s going to be amazing. I know that the community is waiting for it, but the community has to soften up a little bit on me, because while I’m building the hotel, I’m also building the ecosystem around the hotel, and the ecosystem is just as important.”
In 2022, Leal and the city cosigned a Memorandum of Understanding setting performance goals and expected deadlines for the project. The non-binding agreement set a deadline of Dec. 31, 2025 for the start of hotel operations, but increasing costs and an expanded scope have resulted in slower-than-expected progress.
What was initially budgeted as a $16 million project had ballooned to $75 million, where Leal says it has stabilized.
“That’s where the project is now, and I’m hoping it doesn’t go any higher, but who knows?” Leal said. “We’re just in this different economy and different building environment. No one’s been here before.”
Leal cited a volatile mix of international trade policy and global supply chain disruption as major drivers of the ongoing delays.
“It’s tariffs, it’s shipping challenges,” he said. “All of our furniture that used to come out of China is now coming out of Vietnam and going through Thailand. There are a lot of moving parts. It’s basically like getting hit with a second form of COVID.”
Despite the hotel failing to meet the Dec. 31 deadline provided in the MOU, Morgan Hill Economic Development Director Matt Mahood said the city is still working closely with Leal to ensure that the project continues to move forward.
“The city remains actively engaged with the developer, is closely monitoring progress, and has clearly communicated the financial obligations outlined in the Development Agreement,” Mahood said.
Despite delays, Mahood framed the project’s continued progress as a bright spot in an otherwise stalled regional hospitality market.
“The hotel development pipeline throughout the industry has effectively frozen,” he said. “Even strong markets with major employers like Apple, Google, Nvidia and Adobe are not immune.”
Mahood pointed to canceled or delayed hotel projects across the region as examples of the challenges facing hospitality projects—including the December 2024 halt of a fully entitled 114-room Holiday Inn Express project on Cochrane Road in Morgan Hill.
“There’s nobody building hotels anywhere,” Leal said. “I’m just happy I’m still building. We’re fortunate enough to still have a project, because so many projects not only in our town but in our state have just gotten too far away from investors.”
In 2024, Leal entered into a partnership with regional luxury hospitality chain Appellation Hotels to finish building Hotel MOHI and operate the property when complete. Once complete, Hotel MOHI by Appellation would be Morgan Hill’s first full-service hotel, a long-identified priority in the city’s Economic Blueprint.
City staff has described the project as “transformative” for the downtown district.
“I’m invested,” Leal said. “I’m not going anywhere, and the hotel’s not going anywhere. When it opens, it’s going to be spectacular.”
